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How to Calculate Your RBC Mortgage Payment

This piece was originally published on November 2, 2016, and was updated on October 14, 2022. 

If you’re considering a mortgage with RBC, you may be curious what your mortgage payment will look like. To calculate your payment with RBC’s mortgage calculator, you’ll need to know the following: the price of the home you wish to purchase, the down payment you’re going to provide, the amortization period for your mortgage, the mortgage rate, and the payment frequency.

RBC mortgage rates

Mortgage rates offered by RBC are similar to those offered by Canada’s other big banks, but these aren’t necessarily the lowest rates you can get. Many other lenders such as online banks and mortgage brokers offer mortgages with the same terms at a lower rate. By comparison shopping, you can find a provider with the lowest mortgage rates for your selected term. Getting the lowest mortgage rate is the easiest and best way to pay the least amount of interest on your mortgage.

When using a mortgage payment calculator, you’ll also be exposed to many features and calculations. You will be able to see the estimated mortgage default insurance (commonly known as CMHC insurance) you will be required to pay if your down payment is less than 20% of your home’s price. It will also help you calculate your land transfer tax and display your amortization schedule for your mortgage. The amortization schedule will show you how much interest and principal you will pay and how much your updated mortgage balance every year. You can also use our amortization calculator to generate an amortization schedule, and to test out different amortization period scenarios to see what your payments would be like. 

Getting the most out of your mortgage

If you’ve calculated your mortgage payment but aren’t satisfied with the outcome, you may be wondering how you can alter your payments to pay less each month or how to pay less interest.

If you are looking to reduce the size of your payments, you can:

  • Extend your amortization period
  • Decrease your total loan value by providing a larger down payment
  • Get a lower mortgage rate

Extending your amortization period results in paying a lower monthly payment, but for a longer period of time. This will reduce how much you are required to pay every month but increase the amount of interest you will pay over the life of your mortgage. By providing a larger down payment you’ll reduce your total loan value, especially if you put 20% down. A 20% down payment results in not having to pay mortgage insurance, so your total loan value is 80% of the asking price.

To see the savings, let's see how varying down payments can result in varying total loan values. If you are looking to purchase a home for $500,000 and put 5% down, you’ll be required to pay $17,100 in mortgage insurance. Thus instead of having a total loan value of $475,000 your loan value is $492,100. However, if you paid 20% down on your $500,000 home your total loan value is $400,000 as you do not have to pay mortgage insurance.

In order to pay less interest on your mortgage you will have to implement at least one of these strategies:

  • Shorten your amortization period
  • Decrease your total loan value by providing a larger down payment
  • Increase payment frequency
  • Get a lower mortgage rate

By shortening your amortization period, your payments will become larger as you will have to pay off your loan value quicker. The larger payments and the shorter time frame results in more of your payment being used to decrease the principal value rather than paying interest. Also since you are borrowing for a shorter period of time you’ll pay less interest based on the time value of money. Again, our amortization calculator will come in handy if you want to see how your payments will vary with different amortization periods. 

RBC branded mortgages and rates

Similar to other mortgage providers, RBC offers specialized mortgages. These mortgages are branded by the provider and usually have unique features, however they do not necessarily have a lower mortgage rate. For example, RBC has the RateCapper Mortgage which is a variable mortgage with a “capped” rate for five years, the RBC Homeline Plan which allows you to consolidate existing debt and the Energy Saver Mortgage which provides a rebate to help improve your home’s efficiency.

As each mortgage provider has their own branded mortgages, compare the features of these specialized mortgages to determine which works best for you. Also make sure to weigh the opportunity cost of getting one of these branded mortgages versus getting a mortgage at the lowest .

RBC’s posted mortgage rates are similar to their competitors. RBC currently offers the best three-year fixed rate out of all the banks at 2.44%, but this rate is still higher than the market best mortgage rate available of 1.98%. By leveraging knowledge of competitor’s rate, you may be able to negotiate a better rate with RBC. Keep in mind that being a customer of a bank does not get you preferential treatment to receive the lowest mortgage rates; to find your lowest rate consult a mortgage broker. Mortgage brokers offer their services for free and conduct all of the rate comparison shopping required to get you the lowest mortgage rate possible.

 

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Flickr: Jay Woodworth